Reverse Innovation

change by reversal revolution Reverse revolution, the term coined by two Dartm bring outh University Professors Vijay Govindarajan and Chris Trimble refers to any debut that is first introduced in the Developing countries with an abate to afterwards launch it in the western or genuine trades. Reverse founding is also popularly cognize as Trickle-up Innovation. It is so c arrestlyed because generally, all figures have first been made in highly-developed countries and accordingly bought to evolution economies.So far companies have been startle their sphericalization efforts by removing expensive features from their established merchandise, and attempt to cuckold these de-featured products in the growing population. This speak to, unfortunately, is non very competitive, and poses only the closely affluent segments of society in these create countries. Reverse foot, on the other hand, leads to products which argon created topical anestheticly in developing co untries, tested in local markets, and, if advantageful, therefore upgraded for sale and chuck up the spongey in the developed world.The Evolution of Reverse Innovation A diachronic Perspective The globalization journey of Ameri depose multinationals has followed an evolutionary process which can be seen in plain phases. descriptor 1 Globalization Multinationals built unprecedented economies of scale by selling products and services to markets all around the world. Innovation happened at home, and then the modern offerings were distributed everywhere. Phase 2 Glocalization In this phase, multinationals recognized that plot of land Phases 1 had minimized costs, they werent as competitive in local markets as they carryed to be. at that placefore, they focussed on winning market share by adapting global offerings to meet local needs. Innovation equable originated with home-country needs, but products and services were later modified to win in each market. To meet the bud de scribes of customers in silly countries, they sometimes de-featured vivacious products. Phase 3 Local Innovation In this phase, the first half of the turn over innovation process, multinationals are foc victimisation on developing products in-country, for country. They are taking a market-back perspective.That is, they are beginning with a zero- ground assessment of customers needs, rather than assuming that they exit only make alterations to the products they already have. As teams develop products for the local market, the attach to enables them to remain connected to, and to benefit from, global resource base. Phase 4 Reverse Innovation If Phase 3 is in country, for country, Phase 4 is in country, for the world. Multinationals complete the purloin innovation process by taking the innovations originally chartered for poor countries, adapting them, and scaling them up for worldwide use.Of course this is a simplified view of the world, but in essence it holds true. Now, more(prenominal) than ever, achiever in developing countries is a prerequisite for continued vitality in developed ones. Why Reverse Innovation is so important Developing countries give care India, today, with their increasing disposable incomes, and the largest and ever surging centerfield class with higher than before spending capacitates, is now a very lucrative and potent target market for many global companies to venture into and capitalise on or to establish a stronger hold.Though the eye class in India today can afford to spend an extra buck for their added necessities and interests, they still bechance the products developed in the western economies out of reach, highly harmd or unaffordable. Clearly, the products developed in the western or developed economies for their average income families would find very slight consumers in countries like India despite having the worlds largest center field class population, simply because Indian Consumers price to features re quirements of products do non match with that of the products developed in western markets for their average income families.Simply de-featuring the product and introducing the less featuristically loaded product model in the appear markets would not attract them any more either. FIVE SUBSTANTIAL NEEDS GAPS In fact, the needs and opportunities in the developing world are so different from those in the lavish world that the very first requirements for reverse innovation success are humility and curiosity. You must let go of what youve learned, what youve seen, and what has brought you the greatest successes. In fact, it is surpass to assume that you have just landed on Mars.Yes, buyers in the developing world have less money but that is only the obvious beginning. The di displacements run untold deeper. In fact, there are at least five enormous gaps that separate needs in the fertile world from those in the developing world the death penalty gap, the substructure gap, the sustainability gap, the regulatory gap, and the preferences gap. Performance Gap Simply put, with fewer dollars in hand, buyers in the developing world are willing to accept lower performance. This sounds simple copious, but it is not as straightforward as it at first appears.Consider a typical corking-better-best rich-world product line. When global corporations headquartered in the rich world exporting to the developing world, the tendency is to focus just on the good offering, or perchance even to water down the good offering a little bit notwithstanding, from good to fair, to procure the lowest possible price point. This seems sensible enough on the surface. The problem is that a modest price cut say, 10 percent is not nearly enough to make a difference to mainstream customers in the developing world, who may have only one-tenth the income of buyers in the rich world.Such low incomes, however, do not spurious that developing world customers do not need innovative produc ts. Indeed, what they need is radically re throwed designs that make at least the right way performance at an ultra-low price. But there is no way to deliver 50 percent performance at a 15 percent price by diluting existing offerings. The only way to get there is to start from scratch, considering entirely new technologies. Infrastructure Gap In the rich world, most every citizen has access to modern transportation, communication, and energy systems, plus schools, hospitals, banks, courts, and more.In the developing world, most infrastructure is mostly still under construction. This does not mean, however, that developing nations can only gradually catch up. but because they are building from scratch, they can invest in the most modern technologies. Meanwhile, the rich world will only invest as existing infrastructure reaches replacement age, and, even then, will be throttle by the necessity to make any new systems compatible with what already exists. As a result, developing nat ions are hot, new construction markets, while rich nations are tepid maintain, repair, and replace markets.The infrastructure gap, however, affects much more than infrastructure products and services. It affects any offering that relies on infrastructure anything that plugs in, connects to a network, or moves from place to place, and more. overflowing world offerings are designed with the implicit assumption that they will be consumed by those with access to rich-world infrastructure. Logitechs filch was designed for use in the office, not in the living room, because people in the rich world still largely consume video entertainment via cable or satellite, with no mouse in sight.Such offerings do not export well, so an innovation strategy is a must. New offerings must be designed with the developing world infrastructure in mind. In major cities, this may mean an enviable, next-generation infrastructure. In country areas, it may mean no infrastructure at all. When GE designed an ultra-low-cost movable EKG cable car for rural India, for example, one of the top considerations was long electric battery life. Sustainability Gap Worldwide, as the rescue grows, the conflicts between economic vitality and environmental sustainability are likely to become more severe.That said, the pressures will not rise uniformly. In many cases, the intensity of sustainability issues are highest in the developing world. Winning in emerge markets requires recognition of these differences. In authoritative cities in China, for example, air pollution problems are extreme. As such, it is hardly a surprise that China is poised to take the lead in electric cars. Regulatory Gap When regulations dish up appropriately, they eliminate business behavior that is at odds with societal good.They keep consumers safe and markets fair. That said, when regulations become withal interlinking, captured by vested interests, or technologically out-of-date, they can become needless barriers to innovation. Regulatory systems in the rich world are the result of decades of tuition while those in the developing world may be incomplete. Whether this is good or bad from a societal perspective is well beyond the scope of this paper, but the difference can make the developing world a more favourable environment for innovation in certain cases.Products and services designed around rich world regulations may become needlessly complex or expensive for developing world markets. Preferences Gap The worlds great diversity of tastes, preferences, rituals, and habits adds zest to international travel. It also sometimes makes it nearly impossible to achieve full potential in the rising economies through a simple strategy of exporting existing offerings. PepsiCo, for example, is developing new sharpness foods, starting with a new base ingredient. Corn is not nearly so ubiquitous in India as lentils, so Pepsi is commercializing lentil-based chips.Because of these five of enormous needs gaps, the commonplace strategy of trying to win in the emerging economies by making light adaptations of lucky rich world offerings is inadequate. Reverse innovation is the antidote, and reverse innovation is clean-slate innovation. It starts with reassessing customer needs from scratch. Dimensions Summary Definitinon Any innovation that is first introduced in the Developing countries with an intention to later launch it in the western or developed markets. Reverse Innovation is also popularly known as Trickle-up Innovation. Origin Globalization Glocalization- Local Innovation- Reverse Innovation Need Glocalization has proved effective in reaching the top segments of the market in developing nationsbuyers with needs and resources similar to those in the developed world. However, most growth opportunities in emerging markets are not at the top but in the middle market and below, where the gaps between customers needs and those of their developed world counterparts are enormous. Gra dually a new approach is emerging, one that starts with the recognition that if you want to succeed in emerging markets, you must innovate for them.But that isnt the end of the story. Because the global economy is richly interconnected, innovations developed for emerging economies can be extended to other markets, including those in the developed world. To do this a company must adopt a reverse-innovation mind- line up, which means valuing the products that come out of emerging markets and being willing to rethink the underlying assumptions in its developed-world businesses. Gaps that lead to reverse innovation There are five phases or gaps that need to be identified and evaluated performance, infrastructure, sustainability, regulatory and preferences. Examples Tata Motors Tata NanoWhile companies like Ford set up its global railway car platform in India and catered to the niche premium segments in India, Tata introduced the Tata Nano for the price witting consumer in India in 200 9. Tata plans to launch Tata Nano in Europe and U. S. subsequently. GE GE MAC 800GEs innovation on the GE MAC 400 to build a portable low-cost ECG railroad car to cater to the rural population who cannot afford expensive health care was launched as an improved version a year later in 2009, in U. S. as MAC 800.Procter and Gamble (P&G) Vicks Honey cough out Honey-based cold remedyP&Gs (Vicks Honey Cough) honey-based cold remedy developed in Mexico found success in European and the United States market. Nestle Low-cost, low-fat dried noodlesNestles Maggi disfigurement Low-cost, low-fat dried noodles developed for rural India and Pakistan found a market in Australia and New Zealand as a healthy and budget-friendly alternative. Xerox Innovation ManagersXerox has employed two researchers who will look for inventions and products from Indian start-ups that Xerox can use for North America.The company calls them asinnovation managersMicrosoft Starter EditionMicrosoft is using its S tarter editions (targeted at not so technically savvy customers in poor countries and with low-end personal computers) simplified help menu and videos into future U. S. editions of its Windows in operation(p) system. Nokia New business modelsNokias classified ads in Kenya are being tested as new business models. Nokia also incorporated new features in its devices meant for U. S. ustomers after observing phone sharing in GhanaHewlett-Packard (HP) Research Labs in IndiaHP intends to use its research lab to adapt Web-interface applications for mobile phones in Asia and Africa to other developed markets. Godrej Chotukool RefrigeratorIn February 2010, Godrej Groups appliances division, Godrej & Boyce Manufacturing Co Ltd test-marketed a low-cost (dubbed the worlds lowest-priced model at Rs 3,250) refrigerator targeted mainly at rural areas and poor customers in India. The product runs without a compressor on a battery and cooling chips.The company wants to use a community-led distrib ution model (as an alternative channel of distribution) to push for product growth. Tata Swacch Worlds cheapest water purifierSwacch means clean in Hindi. Tata launched the water purifier Tata Swacch targeting the rural market in India with the cheapest water purifier in the market. The product does not require running water, power or boiling and uses paddy field husk ash as a filter. It also uses silver nanotechnology. It can give purified water enough to provide a family of five drinking water for a year.The company feels it will open a whole new market. Pepsico Kurkure and AlivaPepsi is planning to give developed markets (particularly West Asia) a taste of its salted snack Kurkure (and also another snack Aliva). The product enjoys huge success in India and has become a Rs 700 crore brand within a decade of its launch. The success is attributed to product innovation and a good marketing strategy. E. g. do from corn, rice and gram flour, zero per cent trans fats and no choles terol, Rs-3 small packs for pushing sales in the lower-tier towns.Bharat ponder Maintenance Management PracticeThe best practices group at Bharat Forge, a large Indian manufacturer and exporter of automobile components implemented a maintenance management practice it developed in India (developed over 15 to 18 years) in its units it acquired in countries (known for sophisticated engineering) in Germany, Sweden and U. S. The maintenance management process focused on minimizing downtime during machine maintenance and has an advanced information system that predicts problems before they happen.Consequently, Bharat Forge plants globally are very in force(p) and have an average down time of less than 10 per cent. KFC Taco campana Yum RestaurantsKFC test-marketed Krushers, a set forth of chilled drinks in the cold beverages segment in India and Australia and plans to introduce it to other markets. The launch in India was very successful as Krushers accounts for 8 per cent of KFCs b everage sales in India. Yum Restaurants Tex-Mex filament Taco Bell has one Indian-designed dessert (tortilla filled with melted dark chocolate) on Taco Bells US menus.Husk Power SystemsIn India, Husk Power Systems brings light to rural population (over 50,000) by using locally grown rice husks to produce electricity (a unique and cost-effective biomass gasification technology). The company has also true seed capital from Shell foundation in 2009 to scale up operations. LG Low-cost Air Conditioners (AC)South Korea based LG Electronics (LG) planned to develop low-cost air conditioners targeting the middle and lower-middle classes in India. Their goal was to manufacture air conditioners at the cost of air cools which were very common.Renault LoganRenault designed a low-cost model of its brand Logan for Eastern European markets. It also sold in the Western European markets later on. Better Place Smart power system of Battery charging/Swap terminalsIn Israel, Better Place, a elect ric vehicle (EV) services provider (creates systems and infrastructure that make the use of electric cars), created an intelligent grid of battery-charging terminals and battery-swap stations. The company is now present in many countries like China, Japan, Australia, the U. S. , Canada, France and Denmark.GE India Steam TurbinesIn 2010, GEs Indian arm tied up with Triveni Engineering and Industries Ltd to manufacture steam clean turbines in the 30-100MW range. The company plans to then take advantage of lower input costs incurred in manufacturing and export these products to markets in West Asia, Indonesia, Europe and Latin America. Coca-Cola eKOCoolCoca-Colas Indian arm Hindustan Coca-Cola Beverages introduced eKOCool, a chest cooler operating on solar energy with a capacity to store about 4 dozen 300 ml glass bottles. The innovation also charges a mobile and solar lanterns.Coca-Cola has plans to pilot the innovation in different cities in India and may be it will introduce it in other developed countries as well. Vodafone ZoozoosVodafone, which operates in more than 30 countries has plans to make its lovable characters Zoozoos go international. Zoozoos the black-and-white animated creatures, in fact are actual human beings and are quite a rage in India where they were launched in marketing ads and look like aliens and speak an alien language. But the brand message is very receptive to people a beat all age groups.Vodafone has also licensed the characters (and accessories) for retail merchandise across India. Coca-Cola hr Maids PulpyMinute Maids Pulpy was extremely popular in China. It was basically an orange juice with pulp. Coca-Cola introduced it in other countries as well. Wal-Mart Small format stores in MexicoWal-Mart learnt a lesson in Mexico. Mexican shoppers preferred smaller stores compared to the large format stores Wal-Mart had in the U. S. By 2012, Wal-Mart had 1,250 small stores (Bodegas Aurrera stores) out of 2,138 stores in Mexico.W al-Mart then opened similar small-format stores in the U. S. and Latin America. Levis indweller brand imported to the U. S. In 2010, Levi Strauss & Co. launched its dENiZEN brand jeans in China. This was the companys first brand launched outside of the United States. With success, the brand readily spread to India, South Korea, Singapore and Pakistan markets. In July 2011, the brand began selling in the U. S. in Target stores. Variables which bear on Reverse Innovation 1. Income gap- between the consumers of developing and developed countries . Preference Gap- Differing tastes and preferences of consumers of emerging markets 3. Infrastructure Gap- Need of development in the field of Communication Energy transportation. India doesnt have an established telecom infrastructure, for example, so they have kaput(p) straight to cellular telephones and skipped the landline. Thats resulted in innovation driven by infrastructure gaps. 4. Sustainability Gap- Sustainability issues that are more press in poor countries than in rich countries. For instance, air pollution is a big problem in China.Air pollution is also an issue in the West, but it is a very big problem in China. If China wants to grow, it has to control air pollution. Electric cars, as a result, would be expected to be more attractive to the Chinese. 5. Performance Gap- What consumers in emerging markets need is radically reinvented designs that deliver at least decent performance at an ultra-low price. But there is no way to deliver 50 percent performance at a 15 percent price by diluting existing offerings. The only way to get there is to start from scratch, considering entirely new technologies. . Regulatory Gap- Regulatory systems in the rich world are the result of decades of development while those in the developing world may be incomplete. The difference can make the developing world a more favourable environment for innovation in certain cases. 7. Growth opportunities in Emerging Markets like I ndia, China 8. Limitations of Glocalization- The top 10 percent of the people in a poor country like India are similar to those in the United States, so you dont need new innovation for them. You can send them products that Americans consume.But the top 10 percent is a very slim down number. The rest of the population requires innovation. How would Reverse Innovation benefit India Primarily Reverse Innovation would lead to advertize boom in industrialisation. As more and more Multinationals adopt and opt to produce and/or invent new products in India for local as well as western markets, the Indian economy would security guard an increase in FDIs and also the Indigenous Multinationals would instinctively raise their investments to build advanced RD facilities that would inspire cutting edge innovation and engineering.It also means the engineers would experience higher employment opportunities, and the consumer market would profit from better products developed to cater to their n eeds at reasonable prices. Besides OEMs, Reverse Innovation would also lead to the overall development of the entire eco-system comprising of Tier I and II suppliers, technology vendors, educational institutions which support, fortify and facilitate this unprecedented growth through concurrent engineering, providing smart and agile engineering and labor solutions to complex challenges, and development of resources.Reverse innovation is bringing the countries and global markets further closer by fading the global borders to make one world, one market phenomenon a more reality. Reverse innovation would provide further impetus to the globalization while increasing the influence of cross economic dependency and making cross border production and marketing viability plausible and effective.